German lender Deutsche Bank expects the Philippines to post a modest current account surplus this year and the next given recent improvements.
“After two quarters of deficits — the first in more than four years — the current account balance returned to surplus in Q2, albeit a tiny one of $15 million,” it said in a report released over the weekend.
“We’d expected something a touch higher, but nonetheless are pleased to see our view that the worst has passed for the current account validated in the data,” Deutsche Bank added.
The trade balance has been improving for a little more than a year, it noted, and net foreign income and services trade are also continuing to grow.
“As import growth has fallen, the trade surplus has improved. The deterioration in the trade balance peaked in mid-2016 and by June this year, the deficit was lower than it had been a year ago,” the bank said.
“Meanwhile, the rest of the current account — net income from abroad (dominated, of course, by offshore worker remittances) and net services trade — continues to grow,” it added.
Net income inflows rose by 8 percent year-on-year in the first half while net services exports rose 34 percent.
“The combination of a declining trade deficit and growing income and services flows has taken the current account back into surplus in Q2 and we think that surplus will rise over the next year or perhaps more,” it said.
Deutsche Bank expects trends to continue through the end of the year and forecast a modest current account surplus of 1 percent of gross domestic product this year and 2 percent next year.
The current account — major component of a country’s payments balance — measures the net transfer of real resources between the domestic economy and the rest of the world.
The second quarter’s $15-million surplus was a reversal from the $1.25-billion deficit recorded a year earlier.
It brought the first half result to a $234-million deficit, lower than the $424 billion seen in the comparable 2016 period.
The Bangko Sentral ng Pilipinas has said that it was keeping its full-year forecast of a $600-million current account deficit.